Olmert lashed out at the extreme right for the first time in his two-and-a-half-year premiership after a prominent Israeli critic of Jewish settlements in the Palestinian West Bank was violently attacked last week.

"A bad wind of extremism, hate, evil, violence and contempt for state authorities is blowing through certain sectors of the Israeli public and threatening Israeli democracy," said Olmert in his opening remarks to the weekly cabinet meeting.

Olmert said the police and the Shin Bet, Israel's security service, were searching for members of the movement.

Olmert compared the attack on Prof Zeev Sternhell, a political scientist at Hebrew University of Jerusalem, to the 1995 assassination of the then prime minister, Yitzhak Rabin, by a Jewish ultranationalist, and to a hand grenade attack that killed a Peace Now activist in 1983.

Sternhell, a vocal opponent of Israel's settlements in the West Bank and a Holocaust survivor, was wounded when assailants planted a small pipe bomb outside his Jerusalem home.

Police also found posters in Sternhell's neighbourhood offering one million shekels (£159,000) to anyone who killed a member of Israel's Peace Now movement, which also opposes Jewish settlements.

The attack on Sternhell follows numerous reports from Israeli human rights groups that the settlers' use of violence against Palestinians and Israeli police and soldiers, who are charged with protecting the illegal colonists, is growing.

Yesterday police were investigating the latest alleged attack by settlers against a Palestinian.

The body of a 19-year-old Palestinian shepherd was found in a ravine, with 20 gunshots to his neck, in a remote area of the West Bank on the weekend.